Why Apple Could Win Big With Tesla’s Giant New Battery Factory – BY MARCUS W OHLSEN 02.28.14 6:30 AM


Photo: Jim Merithew/WIRED

Tesla CEO Elon Musk. Photo: Jim Merithew/WIRED

The first Tesla I ever saw was stripped down to the chassis, a bare-metal incarnation of the company’s flagship electric Roadster on display at an event in Silicon Valley. Without the need for an internal combustion engine, the two-seater’s petite frame was dominated by a huge battery. My first thought: “This looks like a giant cell phone on wheels.”

As it turns out, I was more right than I realized.

This week, years after that first sighting, Tesla announced plans for what it calls the “Gigafactory,” a 10-million-square-foot plant for making car batteries. The company hopes that the sheer scale of the operation, combined with the inventiveness of its engineers, will bring battery prices down far enough to finally bring its electric cars into the mainstream.

But it’s not just the prospect of a gasoline-free future that has sparked such excitement about the Gigafactory. The same basic lithium-ion tech that fuels Tesla’s cars also runs most of today’s other mobile gadgets, large and small. If Tesla really produces batteries at the scale it’s promising, cars could become just one part of what the company does. One day, Tesla could be a company that powers just about everything, from the phone in your pocket to the electrical grid itself.

Earlier this month, as rumors swirled that Apple might want to buy Tesla, San Francisco Chronicle reported that Tesla CEO Elon Musk had indeed met with the iPhone maker. Musk later confirmed that Tesla and Apple had talked, but he wouldn’t say what about.

Now that Tesla has announced the Gigafactory, Gartner auto industry analyst Thilo Koslowski thinks it would make more sense for Tesla to talk with Apple about something other than an acquisition. “Depending on the capacity of the factory and who the other investors will be, Tesla could start selling its batteries for other products besides cars,” Koslowski tells WIRED. “This could actually mean Tesla might build batteries for Apple.”

Better Batteries for Less Money

To begin erecting its factory, Tesla said it would seek $1.6 billion in debt financing— money that Apple itself could easily supply from its massive cash reserves. In fact, the world’s biggest company could easily put up the money for the entire Gigafactory, which Tesla estimates will ultimately cost between $4 billion and $5 billion. Though industry analysts say the global manufacturing capacity for consumer electronics batteries is already considerable, the economies of scale that Tesla is promising could give Apple access to a whole different level of efficiency, sophistication, and control.

Unlike many parts of the consumer electronics industry, battery-making factories are, in general, highly automated, which means that labor doesn’t factor significantly into production costs. As anyone who has seen Tesla’s car-making robots in action can attest, factory automation is something the company does really, really well. Deep involvement in the project from the start — say, as an investor — could give Apple exactly the kind of intimate involvement with a key supplier that it relishes. This sort of control defines its approach to products. For consumers, that could mean Apple getting better batteries for its devices for less money, just like Tesla wants to do for its cars.

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